3 Undervalued European Tech and Industrial Stocks Poised for Recovery

In volatile markets, contrarian investors often find the most compelling opportunities in companies with discounted cash flow valuations and overlooked growth catalysts. Europe's tech and industrial sectors are no exception. Below are three firms—Qt Group Oyj (HLSE:QTCOM), ams-OSRAM (SWX:AMS), and adidas (XTRA:ADS)—that offer a margin of safety while positioning themselves for recovery through strategic expansions and alignment with macro trends like digitalization and sustainable energy.

1. Qt Group Oyj (HLSE:QTCOM): AI-Driven Growth in Cross-Platform Tools

Qt Group is a leader in cross-platform UI development, with its tools used in industries from automotive to healthcare. Despite a -24% year-to-date stock decline, its fundamentals suggest undervaluation.

Valuation Metrics:
- Forward P/E: 27x (vs. industry averages of 30–40x for software firms).
- EV/EBITDA: 18x, supported by a Rule of 40 score of 45% (combining revenue growth and profitability).
- Margin of Safety: A trailing P/E of 28x and strong free cash flow ($1.8B market cap vs. $1.7B EV).

Growth Catalysts:
- AI Integration: Tools like Qt Accelerate (a low-code platform) and Qt AI Assistant (which automates repetitive tasks) are reducing development costs by 10–30%.
- Sustainability: Adherence to EU CSRD standards and a 35% EBITDA margin signal operational resilience.
- Market Share Gains: Its tech-agnostic platform (supporting Rust, Python, and more) expands its reach beyond traditional C++ developers.

Investment Thesis: Qt is undervalued relative to its AI-driven margin expansion and cross-industry adoption. The stock's beta of 1.75 suggests volatility, but its FY25 revenue stability ($246M) and Rule of 40 health provide a floor.

2. ams-OSRAM (SWX:AMS): Turnaround in Sensors and Deleveraging

ams-OSRAM, a semiconductor and sensor giant, trades at a steep discount due to high leverage. However, its strategic initiatives suggest a recovery is within reach.

Valuation Metrics:
- Forward P/E: 9.8x (vs. 20–30x for industrial tech peers).
- EV/Sales: 0.97, below its historical average.
- Margin of Safety: A P/B ratio of 1.13 and a debt-reduction plan targeting net-debt/EBITDA <2x by meiden 2025.

Growth Catalysts:
- Deleveraging: Plans to sell assets (including its Kulim facility) could raise EUR 500M+ to reduce its EUR 1.5B net debt.
- Sensor Demand: Growth in EVs, IoT, and industrial automation drives sensor sales. Q1/25 revenue of EUR 820M beat guidance, and its Re-establish the Base (RtB) program has delivered EUR 135M in annual savings.
- Operational Turnaround: A 16.4% adjusted EBITDA margin (Q1/25) hints at improved efficiency.

Investment Thesis: While its Altman Z-Score of 0.29 signals distress, the asset sales and margin improvements could unlock value. Investors should watch for Q2/25 FCF exceeding EUR 100M (full-year target) as a catalyst.

3. adidas (XTRA:ADS): Rebuilding a Legacy Brand in Sustainable Sportswear

adidas faces near-term headwinds (e.g., inventory overhang, competition from Nike), but its focus on sustainability and digital innovation positions it for long-term recovery.

Valuation Metrics:
- P/E: ~15x (vs. ~25x for Nike), reflecting market skepticism.
- EV/Sales: 1.2x, below its historical average and peers.
- Margin of Safety: A strong EUR 7.5B cash pile and brand equity in eco-conscious markets.

Growth Catalysts:
- Sustainability: Launch of recycled-material collections and partnerships with climate-focused NGOs align with EU regulations and consumer preferences.
- Digitalization: AI-driven inventory management and e-commerce growth (now 30% of sales) reduce costs and improve agility.
- Market Share: Asia-Pacific expansion and potential recovery in North America could offset European weakness.

Investment Thesis: adidas is undervalued if it can stabilize margins and regain market share through sustainability and omnichannel strategies. Its dividend yield (1.5%) adds a safety cushion.

Conclusion: Contrarian Plays with Growth Tailwinds

Qt Group, ams-OSRAM, and adidas each offer a compelling risk-reward profile. Qt's AI-driven margins and cross-platform dominance, ams-OSRAM's deleveraging and sensor growth, and adidas's sustainable turnaround align with macro trends while trading at discounts to peers.

Investment Advice:
- Qt Group: Buy on dips below EUR 30 (current: EUR 32) for long-term tech exposure.
- ams-OSRAM: Accumulate below CHF 18 (current: CHF 20) as asset sales unfold.
- adidas: Consider entry at EUR 250–260 (current: EUR 270) if Q3/25 margins improve.

These stocks reward patience: their discounted valuations and strategic moves suggest they're primed to outperform once markets reassess their true potential.